Skai Holdings overcomes a trial by fire

A fire at his project site was never going to be enough to douse Kabir Mulchandani’s spirits for long. For someone who had experienced the worst of the global financial crisis, it was just another detail that had to be overcome. And, by the sound of it, he is on top of the situation again.

“When the fire hit our Jumeirah Village property in August, the development was at the 30 per cent mark — a few of the storeys were affected,” said Mulchandani, who heads Skai Holdings. “Since then, we have recovered all of the progress that was lost because of the fire. We have just had a Rera (Real Estate Regulatory Authority) check on-site and we are now back at 32 per cent. There was no need for us to apply the force majeure clause.” (Such a clause is a staple in contractual agreements and removes liability for natural or unavoidable incidents.)

The 60-storey structure, which features 494 units split evenly between hotel rooms and residences, is a joint venture between Skai and China State Construction Engineering Corp. It is now aiming for a late 2017/early 2018 completion.

Meanwhile, Skai’s flagship development — the Viceroy Dubai Palm Jumeirah — is right into its home stretch. With a current gross development value of Dh4.3 billion, it has 477 hotel rooms and 221 residences. “The first of the resident move-ins take place at the end of the month — we actually delivered ahead of schedule and nobody does that,” said Mulchandani.

“We got a 30-year management contract with Viceroy for the property — it’s a time frame that aligns the interests of both the developer and the hotel operator. The average association in this market has typically averaged 20 years ... but there have been involving some of the biggest developers that extend to even 50 years

“There are a lot of advantages that a 30-year deal gives us. I am quite comfortable with that.” (Viceroy will manage the Jumeirah Village tower as well.)

Mulchandani declined to give details about his next venture, beyond saying that a deal with the master-developer is imminent. And this too will stick with a high-end theme. (Skai also owns a second plot in Jumeirah Village, and a decision on that too is pending.)

But of one detail he is quite certain, there will no longer be the property or plot flipping that characterised the market situation prior to 2008. “Post the crisis, there’s been a lot of clarity — we are taking the view that a great asset requires 10-20 years to realise full potential. I have stopped the buying and selling of property and more focused on the holding.”

That patience is paying off — the residential units at the Palm project recorded gains of 5-30 per cent since their launch, according to Mulchandani. The sea-view offering units are fetching Dh3,000 a square foot. (China State Construction Engineering Corp. is a stakeholder in this venture as well. At the time, it was among the first instances of a major Chinese investment into a live real estate project in Dubai. Of late, there is an uptick in sentiments that high-networth Chinese investors would start getting quite active in the luxury end of Dubai’s property space, more so after the relaxation in visa rules.)

For local developers, it is also a good time from a funding aspect, he adds. In September 2015, Skai had entered a $300-million refinancing agreement with a banking consortium.

“That facility is valid until September 2018 — but we have never drawn down the existing facility in full,” said Mulchandani. “We have repaid $70 million — we could end up repaying 1.5 years in advance. That means by next April itself.

“I don’t see a significant upward movement in costs next year — if we are talking about inflation at 2-3 per cent, borrowing costs would not be much higher than that.

source : gulfnews